India's New Law on Foreign Providers

India has a huge unmet demand for higher education. Having a young population and with school enrollment expanding rapidly, this demand is destined to grow further. Country’s increasing prosperity with rapid economic growth mean that more people can now afford to pay for higher education. In this backdrop, there has been keen interest globally about India opening itself to foreign providers.

Thus far, much of the foreign provision in India is through partnerships. A 2008 study identified 641 programs enrolling about 40,000 students through partnerships between 143 Indian and 161 foreign providers with two-thirds of the Indian partners being private players many of them unattached to any Indian university.

Considering that high-end research is now a global enterprise, several universities from the advanced nations have long and enduring research partnerships with the Indian universities. Some of them have Indian outposts to provide Indian experience to their home students. In addition, India is the second largest source of international students and its gap with China that sends the highest numbers is closing.

Thus, Indian higher education is globally well-connected, even though India does not have an internationalization policy. Foreign providers have been around in India since the 1990s. In the late 1990s, amidst concerns of gross commercialization and fraud by foreign providers, a need to regulate their operations, was felt. It also begun to be realized that foreign providers could add much needed capacity and rejuvenate the domestic provision through enhanced choices, increased competition and internationally benchmarked quality.

In the above context, law on foreign providers has been on the anvil for many years. In these years, domestic private provision grew rapidly and there were concerns of their falling standards and wayward ways. Thus, the law had to prevent entry of fly-by-night foreign operators, facilitate entry of the world’s best universities and keep the emerging realities of the country’s domestic sector in mind.

The bill was first drafted four years ago, but due to its political opposition, it was shelved. It got a real push after the new government with its pro-active minister for higher education, Kapil Sibal, took office in June 2009. Reform minded new minister is keen to use foreign provision to shake the Indian system. In an unusual move, he is personally going around world wooing the top universities.

The bill was fiercely debated and went through several iterations. With the final text now available, haze surrounding it is getting cleared. It addresses many concerns raised by interested foreign universities. The law exempts the foreign providers from fee regulations and quotas in admissions, however subjects them to domestic regulators on matters of minimum standards.

Under the law, foreign universities in existence for 20 years or more and having accredited status at home are allowed entry after being endorsed by their respective embassies. There would be a time-bound process for registration with the government retaining its right to reject proposals on grounds of national security and sovereignty. Once registered, it will not be easy for the government to revoke it and the focus is clearly on transparency. This law provides a clear and consistent regulatory regime for entry and operation of foreign providers in India.

The flipside however is a need to set aside a corpus of US$ 11 million. This is to safeguard the interest of students and employees if the institution winds up its operations on its own or asked to exit for violating Indian laws. Even though, the world’s top universities can be exempted from this requirement and most other provisions of law, yet this is a huge dampener.

There is also a restriction on the foreign universities sending back their earnings home. The surplus has to be reinvested in India itself, even though profit generated from consultancy projects can be sent back. This is in line with the Indian laws that define education as a non-profit activity. This debars global for-profit providers that have been most aggressive and keenly watching developments in India.

A more serious concern is the ambiguity surrounding degrees / diplomas offered through a variety of partnerships in place of full-fledged branch campuses. The existing foreign provision is through partnerships and this is likely to be the most popular way for entry and operation of foreign universities in India. None of the existing partnerships are worth $11 million, and most of the new partnerships are unlikely to be worth as much.

Thus, the key to the success of Sibal’s landmark initiative lies in allowing partnerships between the foreign universities and the Indian public and private universities and the Indian private sector to flourish and prosper. There is a need for unambiguous provision in the law to make it happen; otherwise this law may in fact be a step backwards.

While, few foreign universities may set up their full-fledged branch campuses, but much of the action would be through creative partnerships between the foreign universities and the Indian partners. It is through such partnerships; he can shake the system and enhance choice, increase competition and bring in internationally benchmarked quality to the Indian shores.

Pawan Agarwal is a civil servant and author of the book, Indian higher education: Envisioning the future (2009). Views here are personal.